Small, Private Businesses Strong as Sequester Cuts Loom: Sageworks

If research firm Sageworks’ new monthly report is an indication, private and small businesses are heading into Friday’s proposed sequester cuts with strong financials.

According to financial statements filed in the six months ended January 2013, privately held companies saw average annual sales growth of 9% and net profit margins of 8.1%, according to Sageworks in Raleigh, N.C.

The sales growth is slightly lower than the 10.2% average annual growth for statements filed in the six months ended January 2012, but net profit margin is better than the 4.6% margin among statements in that period, the data showed.

Libby Bierman, Sageworks analyst, said there has been much talk about how Friday’s sequester deadline could hurt businesses in America, particularly the potential $902 million cut in SBA loan guarantees.

“While the sequester’s full impact on businesses remains to be seen, the good news is that private companies are in pretty good shape now. Sales growth is strong, profit margins are exceeding pre-recession levels, and credit risk appears to be improving,” Bierman said.

Indeed, private company credit risk also seems to be improving, with the average private company’s likelihood of default currently lower than it was in January 2012, according to Sageworks.

Sageworks said its monthly report includes metrics on the average U.S. privately held company, as well as the performance of notable sectors and industries. For the current report, Sageworks commented on the construction industry, and reported on key metrics for manufacturing, retailing, and wholesale companies.

“The state of private companies is fairly positive,” said Sageworks Chairman Brian Hamilton. “Companies are making money, and they’ve got some cash flow.”

Because the country is in the midst of an economic recovery, Hamilton said the strong performance of private companies reflects this recovery.

“Of course, the big problem right now is still jobs. These companies are not hiring as many people as they used to, which is troubling,” Hamilton noted.